Comparing Volume Licensing Programs: Open License vs EA
Microsoft’s volume licensing offers a variety of programs, with the Open License program and the Enterprise Agreement (EA) being two well-known options that have historically targeted different organizational sizes.
It’s essentially a Microsoft volume licensing comparison of small vs large organizations: the Open License program was traditionally geared toward smaller businesses buying a handful of licenses, while the EA catered to large enterprises standardizing software across hundreds or thousands of users.
With Microsoft licensing for small vs large organizations evolving – and Microsoft’s push to retire or replace some traditional programs – CIOs, procurement leaders, and IT managers must understand how Microsoft Open License vs EA stack up in terms of cost, flexibility, and suitability.
This comparison will help you strategically evaluate which approach (or combination) makes sense for your organization’s needs and how to maintain leverage and cost efficiency in the face of Microsoft’s changing licensing strategy.
Microsoft Open License Program Explained
The Microsoft Open License program was a longstanding volume licensing option designed for small to mid-sized organizations.
Under the Open License, companies could purchase perpetual software licenses in a pay-as-you-go fashion with a low minimum purchase (for example, an initial order of five licenses).
This meant you buy the licenses outright and own them permanently for the version purchased. It offered flexibility – you could add licenses whenever needed without any long-term contract.
However, the trade-off was fewer big discounts or extras: pricing was mostly standard (with minor volume discounts at higher quantities), and advanced benefits like training vouchers or 24/7 support were not included by default (unless you added Software Assurance).
The Open License program provided an affordable, entry-level volume licensing path for organizations that didn’t have enough users to qualify for enterprise programs.
Note: Microsoft officially retired the Open License program in 2022 for new purchases, directing small customers to other channels like Open Value or the Cloud Solution Provider program.
Many principles remain similar in those successor programs – perpetual licensing on a smaller scale – so understanding Open License is still useful when comparing volume licensing options.
Microsoft Enterprise Agreement (EA) Overview
The Microsoft Enterprise Agreement is a comprehensive volume licensing contract tailored for large organizations (generally 500+ users or devices).
An EA is a 3-year contractual commitment that covers an enterprise-wide deployment of Microsoft products.
This means the company agrees to license certain software for all eligible users or machines across the organization, which could include Windows OS upgrades, Office suite,s or Microsoft 365 subscriptions, client access licenses, and even Azure cloud services.
In exchange for this broad commitment, EA customers receive volume discounts on software pricing (with deeper discounts at higher tiers of users) and valuable benefits bundled through Software Assurance (SA).
With SA included, an EA provides upgrade rights to new versions, product support, training credits, and other perks over the term – contributing to more predictable spend and planning.
An Enterprise Agreement’s advantages include locked-in pricing for three years (shielding from Microsoft’s price hikes during the term) and the convenience of a consolidated contract for all major software needs.
However, the high entry threshold and all-inclusive nature mean it’s geared toward large enterprises; Microsoft typically requires a minimum of around 500 seats for an EA, and it shines for companies with thousands of users where standardizing software and maximizing discounts are top priorities.
In short, an EA is Microsoft’s flagship subscription licensing arrangement for big organizations that want comprehensive coverage, predictable costs, and direct negotiation power – but it comes with a significant commitment.
Key Differences – Open License vs Enterprise Agreement
Both Open License and Enterprise Agreement are Microsoft volume licensing programs, but they differ dramatically in structure and target use cases.
Below we break down the key differences in their licensing model, cost structure, organization size, flexibility, and cloud capabilities:
Licensing Model
- Open License: A transactional, perpetual licensing model. You purchase software licenses outright, one order at a time, owning each license indefinitely. There’s no requirement to license every device or user – you simply buy what you need, when you need it. This model is akin to a one-time capital purchase of software and is ideal if you want permanent use rights for specific versions of products. Optional Software Assurance could be added to an Open License purchase to gain upgrade rights for a limited time, but it’s not mandatory.
- Enterprise Agreement: A subscription-style licensing model with an enterprise-wide scope. Under an EA, you commit to covering all qualified users or devices with certain products for a three-year term. It’s less about individual purchases and more about a comprehensive agreement that says, for example, “every employee will get Office 365 and Windows 11 Enterprise.” Payment is typically spread annually, and at the end of the term, you can renew or adjust the agreement. In the case of an Enterprise Subscription Agreement, you don’t retain perpetual rights unless you renew (it’s like renting the software); in a standard EA with perpetual licensing + SA, you do gain perpetual licenses after fulfilling the agreement. In either case, the EA’s model is all-encompassing and suited to organizations that want a unified, centrally managed subscription licensing approach across the board.
Cost Structure
- Open License: Costs are primarily upfront. You pay a one-time fee for each license at the time of purchase. There are no recurring charges for that license unless you choose to buy Software Assurance (which is an add-on annual fee, roughly 25% of the license price per year, to get upgrades and support). If you forego SA, you might later buy new licenses when new versions are released, but you’re not obligated to any ongoing payment. This structure keeps things simple: you budget for licenses as a capital expense when needed. It can be very cost-effective if you tend to skip versions or don’t need continuous upgrades, because you’re not continuously paying for subscriptions. However, without an active agreement, there’s no built-in price lock – each time you buy more licenses, you pay whatever the current price is (which could rise over time).
- Enterprise Agreement: Costs are recurring and bundled. When you sign an EA, you commit to paying for a package of licenses (and included Software Assurance) over three years, typically in annual installments. Essentially, it functions like a subscription: for Microsoft 365 or other products, you pay per user per year. Even for on-premises licenses, the EA often breaks the payment into three yearly tranches (and includes SA), so you’re continuously investing rather than making one-off purchases. The EA’s pricing benefits come through volume-based discounts (Microsoft has tiered pricing levels – larger organizations pay a lower unit price) and the inclusion of upgrade rights, meaning you don’t pay extra when new versions are released during your term. The cost structure favors predictable budgeting – you know your annual spend for the term – but it can also lead to higher total costs if your needs change. For example, if you overestimated your user count or bought more capability than you end up using, you still pay the agreed amount until the term ends. Conversely, if your company grows, you’ll “true-up” and pay for the additional users or usage annually, which can increase costs. In summary, an EA rolls licensing and maintenance into one recurring bill, trading flexibility for predictability and potential discounts.
Organization Size & Eligibility
- Open License: Aimed at small and mid-sized organizations. There was no strict maximum user count for Open License, but in practice, it served companies ranging from a few employees to a few hundred. It was often the starting point for businesses that outgrew retail box software but weren’t large enough for an enterprise contract. If your organization only needs dozens of licenses or has, say, 50 or 200 users, an Open licensing program (or its modern equivalent, like Open Value) is appropriate and efficient. Microsoft has historically structured Open licensing for easy entry, requiring a minimum of just five licenses to start, making it accessible to small businesses. Suppose a company grew significantly (toward several hundred seats). In that case, they might then evaluate moving to a bigger program for better discounts, but there was no hard cutoff until the EA’s minimum.
- Enterprise Agreement: Designed for large organizations. Microsoft generally requires 500 or more users/devices to be eligible for an EA (and in practice, the value of an EA really shows for organizations in the many hundreds to thousands of seats). In fact, Microsoft’s licensing strategy now strongly encourages customers with fewer than 500 seats to use other programs like CSP or Open Value instead. For enterprises above that threshold, the EA becomes viable and often cost-beneficial. The large scale is needed because the EA involves enterprise-wide standardization – it assumes you have enough volume to justify a contractual approach. If you have 5,000 or 50,000 employees, an EA is built for you; if you have 100, it’s not. In short, the size of your organization is a key deciding factor: under ~500 users, you won’t qualify (or need) an EA, whereas above that, an EA might be the only way to get significant volume discounts and centralized management. Microsoft even has different pricing levels within the EA that improve with larger seat counts, underscoring that it’s optimized for scale.
Flexibility & Commitment
- Open License: Highly flexible, no long-term commitment. With Open licensing, you are not locked into any contract beyond the immediate transaction. You can decide this year to buy 20 Visio licenses for your design team, and then decide to buy nothing next year – there’s no penalty or obligation. If your organization’s needs decrease, you simply stop purchasing new licenses; you won’t be paying for software you’re not using (aside from what you already bought, which you keep). You also have the freedom to mix and match products as you go – there’s no requirement to standardize company-wide. This flexibility reduces risk: you can adjust your software investments on the fly according to hiring, budget, or technological change. On the flip side, each purchase is a standalone event, so if you suddenly need a large number of licenses, you’ll have to budget for that lump sum. But importantly, Open License does not “lock you in” beyond the licenses you chose to buy. You retain full control, and compliance is straightforward (owning perpetual licenses means that as long as you’ve bought enough for the users using the software, you’re compliant). There’s no surprise true-up bill; you only spend when you decide to spend.
- Enterprise Agreement: Rigid commitment for the term of the contract, with limited flexibility. When you sign an EA, you’re committing to maintain a certain level of licensing for 36 months. During that period, you cannot reduce your license count or drop products – even if your business shrinks or you realize some software isn’t being used, you must continue to cover the initially agreed quantity until renewal. The only flexibility is in one direction: if you grow or add new usage, you are required to report and pay for those additions (usually via an annual true-up process). This ensures compliance but means your costs can increase with growth, while they won’t decrease with contraction until the end of the term. Additionally, switching out of an EA mid-term is generally not possible without significant penalties – you are effectively locked into Microsoft’s ecosystem for the duration. This model demands careful forecasting of your needs to avoid overcommitment. From a flexibility standpoint, an EA is less agile: you’re making a strategic bet on Microsoft technologies for three years. That said, the EA’s multi-year commitment does come with the benefit of a stable budget and guaranteed access to the latest software. If flexibility and minimal commitment are your top priorities, the EA’s structure can be a drawback. It requires a higher degree of license compliance discipline, too – you must track deployments to ensure you report any over-use, and you must plan for renewal time to adjust terms or exit. In contrast, Open License was “pay as you go” with no strings attached once the purchase was done, whereas EA is “commit now, pay as agreed” with ongoing obligations.
Cloud Services & Hybrid Rights
- Open License: Limited support for cloud services and hybrid scenarios. The traditional Open License program centered on perpetual licenses for on-premises software (like Windows, Office, or server products). It was not inherently built for modern cloud subscriptions. While it was possible in the past to buy certain Microsoft online services (like Office 365 seats or Azure $ credits) through volume license resellers in limited ways, the Open License channel was cumbersome for that, and Microsoft has phased those out. Essentially, if you’re using the Open licensing approach today (e.g,. Open Value), you’d acquire cloud services through separate programs – most small organizations now use the Cloud Solution Provider (CSP) program for things like Microsoft 365 subscriptions. Open License also didn’t automatically grant cloud or hybrid use rights. For example, a Windows Server license bought via Open would be for on-prem use; if you wanted to use it in Azure, you’d need active Software Assurance for License Mobility. Without an added agreement, a perpetual license is tied to a specific use. So in terms of cloud readiness, the Open License model is limited and outdated: it’s best for static, on-premises needs, and you’d handle cloud services separately.
- Enterprise Agreement: Well-suited for cloud services and hybrid cloud rights. Microsoft’s EA has evolved to cover not only traditional software but also cloud offerings, such as Azure consumption, Office 365 (now part of Microsoft 365), Dynamics 365, and more. An EA can include an enterprise’s entire Microsoft 365 subscription roll-out, and it often comes with incentives or discounts for cloud adoption (for instance, committing to a certain Azure spend per year). The EA with Software Assurance or as a subscription inherently grants hybrid benefits: if you have Windows or SQL Server under the EA, you typically have rights to use those licenses in the cloud (Azure Hybrid Benefit) or to run dual-use (on-prem and cloud during migration). This makes an EA attractive for organizations pursuing a cloud-first strategy or running hybrid environments, because all usage falls under one agreement with consistent terms. In short, the EA is built for the modern cloud era: it lets large customers seamlessly mix on-prem and cloud licensing, move workloads to Azure with their existing licenses, and manage everything under one umbrella. By contrast, a small-business Open license approach would require piecemeal arrangements for cloud services. So if your organization plans to leverage significant cloud services and wants integrated management and pricing, the EA is far superior. Microsoft has been steering customers in that direction – part of why programs like Open License were retired in favor of cloud-focused licensing.
Cost Drivers in Open License vs EA
When comparing the costs of Open License vs an Enterprise Agreement, it’s important to understand what factors drive expenses in each model. Each program’s structure means different levers will impact your total spend:
- Number of Users or Devices: Scale is the biggest cost driver. In an EA, the more users/devices you include, the more you pay – though higher counts also earn you bigger volume discount tiers. Under the Open License, you only buy for the users/devices you need, so a smaller scope directly means lower cost. There’s no requirement to cover everyone unless you choose to. Thus, an organization with 50 users will spend far less under an Open scheme than a 500-user EA, which mandates enterprise-wide coverage. Conversely, a very large user count can make the EA per-license cost quite attractive compared to buying hundreds of separate Open licenses.
- Product Choices and Licensing Tiers: What you’re licensing has a huge impact. In an Open License scenario, you might pick and choose specific products (maybe just Office Standard edition for some users, Windows upgrades for a few PCs, etc.), keeping costs to what’s necessary. In an EA, typically, you standardize on certain product editions across the board. If you choose high-end options like Microsoft 365 E5 (which includes advanced security, voice, analytics, etc.), your cost will be much higher than if you went with E3 or a basic package. Premium products and add-ons (like enterprise security suites or the new AI-powered Microsoft Copilot feature) will significantly increase EA costs. Essentially, under an EA, you might be paying for bundles of features; if not all of them are used, that’s wasted spend. With an Open purchase, you could instead buy only the specific software needed for each user or department. The key is that EA costs can balloon with richer product bundles, while Open licensing costs increase only when you deliberately add more items.
- Perpetual vs Subscription Needs: Consider whether your organization benefits from continuous updates or not. Open License is a perpetual model – you pay once and use a version indefinitely. If you don’t need to upgrade every year, you might skip buying new versions for a while, effectively saving money by spacing out purchases. EA, on the other hand, is by nature a subscription or includes ongoing upgrades, which you are funding as part of your contract. If your strategy is to always have the latest software and access to cloud services, the EA’s recurring cost is justified and likely cheaper than buying new versions piecemeal. But if you would be fine running a stable version for 5+ years, the EA could end up costing more over that period than an outright purchase would have. In summary, needing constant updates and cloud features pushes you toward the EA (subscription licensing), whereas if you have mostly on-premises needs that change slowly, perpetual licenses can be more cost-effective.
- Software Assurance and Support: With Open License, Software Assurance (SA) is optional and can be applied selectively. Adding SA under Open increases the upfront cost (and comes with annual renewals until the SA term ends), but it provides value, including upgrade rights, license mobility, and technical support. If you skip SA, you save money now but might have to spend more later to upgrade to a new version. In an EA, SA is generally included for all licenses as part of the deal – meaning your cost already factors in those benefits. So one could say an EA’s cost drivers include the built-in maintenance: you’re paying for the assurance of staying current and getting support. If you were to replicate that in Open License by adding SA to every purchase, the cost difference narrows. The decision here is whether you want to invest in SA (EA forces that investment across the board; Open lets you choose where it’s worth it). Companies that heavily utilize SA benefits (training, upgrades, home-use rights for Office, etc.) will value what they get in an EA. Others that never use those perks might feel they’re paying extra for unused services in an EA, whereas with Open, they could cut those costs out.
- Add-ons and Advanced Services: Certain high-end capabilities and services can only be obtained (or are only practical) through a subscription model. For instance, if your organization wants an enterprise security suite (like Microsoft’s E5 Security stack) or plans to deploy something cutting-edge like Microsoft 365 Copilot (an AI assistant service), these are additional licensing components usually tied to subscriptions. In an EA, choosing to include these add-ons for all users will raise the overall cost significantly. With Open License alone, such services wouldn’t be available as perpetual licenses – you’d have to subscribe via CSP or another channel on top of your Open licenses if you wanted them, potentially for a subset of users. So, one cost driver for an EA is the scope of services you fold into it. The more you bundle into the all-encompassing agreement (security, compliance, voice, analytics, etc.), the higher the price tag. The flip side is that bundling can sometimes yield better pricing than buying those services separately. A buyer should carefully analyze if including an add-on in every user’s EA is necessary or if it could be applied to only specific users via a different licensing approach to save money. In summary, EA costs are influenced by the breadth of coverage (both in user count and in product functionality), whereas Open License costs are incremental and focused on individual needs.
Negotiation & Strategic Considerations
Choosing between Open License and an Enterprise Agreement isn’t just a one-time decision – it’s part of a larger Microsoft licensing strategy for your organization.
Microsoft, of course, has its own strategy (they would love to transition more customers to subscription-based agreements for steady revenue).
Still, as a buyer, you should take a stance that puts your needs first: leverage options against each other, mitigate costs, and reduce risks.
Here are some strategic considerations and negotiation tips to keep in mind:
- Leverage smaller programs for parts of your business. You don’t have to put everything under one EA if it doesn’t make financial sense. Suppose you have a division or subsidiary that only needs a handful of licenses or has very sporadic needs. In that case, you can keep those on a transactional program (such as using Open Value or CSP for that segment) instead of including them in the EA. This can sometimes be more cost-effective and flexible. It also gives you a negotiation chit – Microsoft sales reps may push for a big comprehensive EA. Still, if you can demonstrate that you’re willing to split out a portion of spend to a smaller licensing program, they know they have to earn your business with a better EA offer. In the past, organizations have even threatened to stay on or revert to Open licensing for certain products if EA pricing wasn’t favorable. Use that possibility as leverage to secure deeper discounts or concessions in your EA. Remember, Microsoft would prefer to keep as much of your estate as possible in an EA, so maintain that optionality on your side.
- Come prepared to negotiate the EA contract (with benchmarks and flexibility requests). An Enterprise Agreement is not a fixed-price menu – especially for large deals, there is room to negotiate pricing and terms. Smart procurement teams gather benchmarks: for example, what percentage discount off list price other companies of similar size have achieved, or what a shift to a CSP model might cost as an alternative. During your EA contract negotiation, don’t be shy about telling Microsoft, “Our target is to reduce cost by X%” or “We need this flexibility clause included.” Common asks might include the ability to true-down (reduce licenses) at renewal without penalty, or to have a subset of licenses on a shorter term if you’re unsure about a product. Also, if Microsoft is quoting a big number, get competitive quotes from CSP resellers for equivalent subscriptions – even if it’s not apples-to-apples, it gives you a sense of market rates. Microsoft often responds to data-backed negotiation; if they know you have done your homework on pricing, they’re more likely to give a better concession. Your goal is cost mitigation and risk reduction: lock in pricing protections, ensure you’re not paying for more than you need, and get clarity on how things like Azure overages or license transfers would work. In an EA negotiation, everything is potentially negotiable if your spend is big enough – including payment terms, deployment schedules, and even the inclusion of certain future products. Take advantage of that, and remember that no matter how pushy the sales pitch, you have alternatives (like not doing an EA or only partially doing one) that you can fall back on.
- Consider a hybrid licensing strategy. It’s not always all-or-nothing between Open vs EA – many enterprises adopt a hybrid approach to optimize costs. For example, you might use an EA to cover your enterprise-wide core software (like Windows OS upgrades and Office 365 for every full-time employee, which gets you the best pricing on those widely-used items), but then handle other niche software needs outside of the EA. Perhaps your developers or a specific department need a specialized Microsoft tool – instead of adding that to the EA for all users, you could buy a handful of licenses via a smaller program or through your CSP just for that team. This avoids “EA bloat,” where you pay to include products that don’t actually need to be deployed everywhere. Another scenario: if you have a rapidly growing or shrinking department and you’re unsure of their future size, keeping them on a flexible month-to-month cloud subscription via CSP might be wiser than locking them into the EA’s three-year contract. A hybrid model lets you mix and match: the EA handles what you know is needed across the organization (at a good bulk rate), and other licensing programs fill the gaps for more variable or limited needs. This strategy can reduce risk by localizing any over-commitment to a smaller slice rather than your entire enterprise. Just keep an eye on management overhead – you’ll need processes to track licenses in multiple programs – but many find the savings and flexibility well worth it.
- Stay vigilant about Microsoft’s program changes and use them to your advantage. As noted, Microsoft retired the Open License program and has been steering smaller customers toward CSP and larger ones toward either EA or the Microsoft Customer Agreement. Such changes often come with transitional incentives – for instance, if you’re being forced off a legacy program, you might negotiate a better price in the new one as part of that change. Always ask: “What special discounts or credits can you offer since we have to move to this new licensing scheme?” Similarly, if your EA is ending and Microsoft suggests you switch to a different model (perhaps because your seat count dropped below 500), leverage that moment to evaluate all options. The key is to not automatically accept Microsoft’s first recommendation; evaluate the costs and benefits yourself. Being somewhat skeptical of Microsoft’s pushy upsells or transitions can save you money. Microsoft’s goal is often to maximize its revenue and lock-in, whereas your goal is to get the right licensing at the right cost. Keep the conversation focused on your business outcomes – for example, if you’re migrating to Azure, maybe you ask for some Azure credits or flexible cancellation terms in the agreement to reduce risk. By staying informed (e.g., knowing that “smaller EAs are being nudged to CSP” or that a new product like Copilot will add cost but maybe can be bought just for certain users), you can make strategic choices that favor your budget and operational flexibility.
FAQ – Microsoft Volume Licensing Comparison
Q1: Is Open License still available?
A: Not for new purchases. Microsoft officially retired the Open License program in January 2022 for commercial customers. This means you can no longer buy or renew licenses under that scheme. Small organizations now obtain Microsoft licenses through newer channels like Open Value or the Cloud Solution Provider (CSP) program, which have replaced the old Open License model.
Q2: Who should choose Open License vs EA?
A: Generally, small to mid-sized organizations (under about 500 users) should go with an Open licensing approach (or its modern equivalents) because it offers one-time purchases and flexibility without a large commitment. In contrast, Enterprise Agreements are suited for large companies (500+ users) that need to license software enterprise-wide and benefit from volume discounts and centralized management. If your company is large enough to qualify and you plan to standardize across the board, an EA can be cost-effective. If you’re smaller or only need a limited number of licenses, a transactional program is the better fit.
Q3: Can cloud services be licensed via Open License?
A: Not in the current model. The old Open License program was focused on perpetual software licenses, and Microsoft now delivers cloud services (like Microsoft 365 or Azure subscriptions) through subscription-based programs. Small and mid-size customers use CSP or similar agreements to get cloud services – those allow monthly or annual subscription licensing. Under the retired Open License program, you could not natively and flexibly subscribe to cloud services. So, for practical purposes, if you want Office 365, Dynamics 365, Azure, or other cloud products, you will be licensing them via cloud subscription programs or an EA, not via Open License.
Q4: What’s the biggest cost driver in an EA?
A: The scope of coverage is the biggest driver – primarily the number of users/devices you commit to and the specific products/features you include. Because an EA is an all-you-can-eat buffet for your organization, enrolling 1,000 employees will cost roughly double what enrolling 500 employees would, for the same product set. Additionally, choosing high-end product bundles (for example, Microsoft 365 E5 plans instead of E3, or adding comprehensive security/compliance add-ons for every user) will significantly increase the cost. In summary, an EA’s cost scales with how extensive your licensing footprint is: more users and more premium services = higher spend. Effective EA cost management involves right-sizing the enrollment (don’t cover people or features you don’t actually need enterprise-wide).
Q5: Can organizations mix Open License and EA?
A: Yes, organizations can mix licensing programs to optimize their costs and flexibility. In fact, many enterprises do this. For example, a company might maintain an Enterprise Agreement to cover its primary software needs for most employees, but at the same time, it could purchase certain licenses outside the EA for smaller teams or one-off projects. In the past, that might mean having an Open License or Open Value agreement for a subsidiary, or buying some extra licenses via a reseller on the side. Today, it could mean using CSP subscriptions for a particular department while the rest of the company is on the EA. This hybrid approach allows you to not “over-buy” in the EA for scenarios that don’t fit a one-size-fits-all model. The key is to manage it properly – track what’s licensed under which program – but mixing programs is absolutely possible and sometimes the smartest financial move.
